In re Polaris Industries, Inc.

This
matter is before the Court on Defendant Polaris Industries,
Inc.'s Motion to Dismiss. For the following reasons, the
Motion is granted.

BACKGROUND

Plaintiffs
in this putative class action are several individual
investors and one institutional investor, Lead Plaintiff City
of Atlanta Police Officers' Pension Fund. (Am. Compl.
(Docket No. 64) ¶¶ 11-12.) Plaintiffs seek to
represent a class of investors who invested in the common
stock of Defendant Polaris Industries, Inc. between February
20, 2015, and September 11, 2016. (Id. ¶ 1.)
Plaintiffs claim that Polaris made false and misleading
public statements about defects in its off-road vehicles
(“ORV”). Polaris recalled hundreds of thousands
of ORVs during the class period after well-publicized
incidents in which Polaris ORVs caught fire, resulting in
more than one fatality. According to Plaintiffs, when Polaris
finally revealed the truth about the extent and effect of the
defects, Polaris was forced to adjust its stock
guidance-which tells investors how much the stock might earn
in a given time period-to cut the company's earnings
prediction by nearly 50 percent. (Id. ¶ 7.)
Plaintiffs allege that they either bought Polaris stock at an
inflated price or retained it through declines in market
prices because of Defendants' allegedly false and
misleading statements. (Id. ¶ 214.)

Polaris
first issued a recall for some of its ORVs in July 2015, when
it recalled 4, 300 Youth RZR model-year 2015 vehicles.
(Id. ¶ 48.) But according to Plaintiffs,
consumers had complained of fire problems with Polaris's
ORVs going back to 2012. (Id. ¶¶ 43-44.)
Indeed, several individuals posted videos on YouTube showing
their Polaris RZR models on fire. (Id.) The Amended
Complaint lists nine instances of YouTube videos of RZR
fires, and two instances of another model, the Ranger,
catching fire, before the July 2015 Youth RZR recall.
(Id.)

In
October 2015, Polaris issued another recall for two models of
the 2015 RZR, comprising 53, 000 vehicles. (Id.
¶ 48.) In December 2015, Polaris recalled more than 2,
000 RZR XP Turbo vehicles. (Id.) In April and June
2016, Polaris recalled more than 200, 000 additional RZR and
Ranger vehicles. (Id.) On July 25, 2016, Polaris
issued a stop ride/stop sale advisory for 2016 models of the
RZR XP Turbo, and recalled all of those vehicles on September
1, 2016, ten days before the end of the class period here.
(Id.)

On
September 12, 2016, Polaris announced that it was cutting its
2016 earnings predictions because of the
“thermal-related issues” in the RZR model and the
damage those issues were causing to sales of all Polaris
ORVs. (Id. ¶ 89.) Polaris estimated that
earnings per share for 2016 would be $3.30 to $3.80, when it
had previously predicted earnings at $5.80 to $6.50 per
share, and announced that sales were expected to be down more
than previously anticipated. (Id.) Polaris
ultimately had to recall another 56, 000 ORVs in September
2016 and March 2017. (Id. ¶ 48.) The September
12, 2016, announcement caused Polaris stock to decline 5%,
although more serious stock-price declines happened after the
July 2015 recall.

Plaintiffs
do not list the price of Polaris shares in the Amended
Complaint, but rather chart the dollar amount of declines and
percentage declines for the various company announcements.
(Id. ¶ 216.) An Internet search reveals that at
the beginning of the class period, February 20, 2015, Polaris
stock had a per-share price of $155.57. This was near the
all-time high price for Polaris's shares. By the end of
July 2015, the price was down to $137.06, and at the end of
January 2016 Polaris's shares were trading at $73.84.
Although the price rose to around $100 per share during parts
of 2016, the price fell to $70.50 on September 16, 2016. By
late November 2016, however, the share price had rebounded to
around $90 and is currently trading at around $104 per share.
See N.Y. Stock Exch., Polaris Industries Inc.
(PII), https://www.nyse.com/quote/XNYS:PII (last visited
October 13, 2017).

The
Amended Complaint alleges that Defendants violated
§§ 10(b) and 20, and Rule 10b-5, of the Securities
and Exchange Act of 1934. 15 U.S.C. §§ 78j(b),
78t(a); 17 C.F.R. § 240.10b-5. Section 10(b) makes it
unlawful “[t]o use or employ, in connection with the
purchase or sale of any security . . .[, ] any manipulative
or deceptive device or contrivance in contravention of such
rules and regulations as the Commission may prescribe . . .
.” 15 U.S.C. § 78j(b). Rule 10b-5 quantifies the
conduct proscribed by section 10(b), making it illegal

(a) To employ any device, scheme, or artifice to defraud,

(b) To make any untrue statement of material fact or to omit
to state a material fact necessary in order to make the
statement made, in the light of the circumstances under which
they were made, not misleading, or

(c) To engage in any act, practice, or course of business
which operates or would operate as a fraud or deceit upon any
person,

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